Court File and Parties
COURT FILE NO.: CV-22-0013 DATE: 2023-12-07 ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
LUKE JUDSON Applicant
- and -
HARROLD BOVEN Respondent
Counsel: Douglas W. Judson and Peter A. Howie, for the Applicant J. Paul R. Cassan, for the Respondent
HEARD: April 18, 2023, at Fort Frances, Ontario (via Zoom)
The Honourable Justice B. R. Warkentin
Reasons on Application
[1] The applicant alleges that the respondent, Harrold Boven, contravened the Municipal Conflict of Interest Act, R.S.O. 1990, c.M.50 (MCIA) when, as an elected council member of the Township of Emo (the Township), he seconded a motion to indemnify the mayor, Harold McQuaker, himself, and one other council member, Warren Toles, for legal expenses incurred to respond to an application before the Human Rights Tribunal of Ontario (HRTO). The complaint to the HRTO was against the Corporation of the Township of Emo, and named the mayor, the respondent, and Councillor Toles personally, alleging that the Council’s refusal to adopt a resolution recognizing Pride Month was discriminatory within the meaning of the Human Rights Code, RSO 1990, c.H.19.
[2] The Township Council is comprised of the mayor and four elected councillors. The complaint to the HRTO named only those members of Council who opposed the resolution. In other words, three of the five elected members of Council.
[3] At a council meeting on June 29, 2022, Council voted in a split decision, in favour of indemnifying the respondent, the mayor and Councillor Toles for legal fees and expenses incurred or to be incurred in responding to the HRTO complaint. The decision was split with the mayor, the respondent and Councillor Toles voting in favour and the two councillors not personally named in the HRTO voting against.
Motions to Strike
[4] Prior to hearing argument on the application, both the applicant and the respondent brought procedural motions seeking to have certain portions of the affidavit of the respondent and portions of the affidavit and factum of the applicant struck under Rule 25.11 of the Rules of Civil Procedure. They each allege that various statements made by the other are: a) unsupported by the evidence; b) outside the personal knowledge and belief of the deponent of the affidavit; c) speculative; d) irrelevant to the matters in issue; e) impermissibly controversial or contain impermissibly contentious facts; f) contain legal argument; and g) scandalous, frivolous or vexatious; or an abuse of the process of the court.
[5] Argument on the application immediately followed the motions to strike.
[6] Having had the benefit of reviewing the entire record and hearing oral argument regarding the substantive issues in this proceeding, I am able to determine the issues in the application without consideration of those portions of the affidavits that fall outside the boundaries of Rule 25.11.
[7] I find that both motions to exclude evidence or statements made have some merit. However, the issues in this application are narrow and my reasons are an analysis of the law of pecuniary interest by members of a municipal council and the appropriate remedy should I find that the MCIA was contravened.
[8] It is unnecessary to delineate each of the alleged contraventions of statements made as set out above to reach my decision.
Summary of this Application and the Evidence
[9] An application by the applicant, a constituent (voting member of the public) of the Township, alleging contravention of the MCIA by members of Council was first issued on July 22, 2022. The respondents were the mayor, Harold McQuaker and Councillors Harrold Boven and Warren Toles. That application alleged, among other things, that the three of them contravened the MCIA by failing to declare a conflict of interest and disclose a pecuniary interest when voting at Council on June 29, 2022.
[10] On January 2, 2023, a Fresh as Amended Application was issued that withdrew the allegations against the mayor and Councillor Toles, leaving only one respondent, Harrold Boven.
[11] The issues in the Fresh as Amended Application are limited to whether the respondent contravened the MCIA when he declared a potential pecuniary interest in an agenda item and then proceeded to participate in the discussion and vote on the issue in question.
[12] The applicant is seeking a finding that the respondent contravened s. 5 of the MCIA and an order that the respondent’s seat on council be declared vacant.
[13] Sections 5, 5.1 and 5.2 of the MCIA are as follows:
5 (1) Where a member, either on his or her own behalf or while acting for, by, with or through another, has any pecuniary interest, direct or indirect, in any matter and is present at a meeting of the council or local board at which the matter is the subject of consideration, the member, (a) shall, prior to any consideration of the matter at the meeting, disclose the interest and the general nature thereof; (b) shall not take part in the discussion of, or vote on any question in respect of the matter; and (c) shall not attempt in any way whether before, during or after the meeting to influence the voting on any such question.
(2) Where the meeting referred to in subsection (1) is not open to the public, in addition to complying with the requirements of that subsection, the member shall forthwith leave the meeting or the part of the meeting during which the matter is under consideration. …
5.1 At a meeting at which a member discloses an interest under section 5, or as soon as possible afterwards, the member shall file a written statement of the interest and its general nature with the clerk of the municipality or the secretary of the committee or local board, as the case may be.
5.2 (1) Where a member, either on his or her own behalf or while acting for, by, with or through another, has any pecuniary interest, direct or indirect, in any matter that is being considered by an officer or employee of the municipality or local board, or by a person or body to which the municipality or local board has delegated a power or duty, the member shall not use his or her office in any way to attempt to influence any decision or recommendation that results from consideration of the matter.
[14] The facts that are not contentious are: a) The main applicants in the HRTO complaint are two northern Ontario-based LGBTQ2 organizations. Their application to the HRTO alleges that in the spring of 2020, Council’s refusal to adopt a resolution recognizing Pride Month was discriminatory within the meaning of the Human Rights Code. (The merits of the HRTO proceeding are not relevant in this application), b) In November 2020, the members of council who voted against the resolution to recognize Pride Month, being the respondent, the mayor, and Councillor Toles, together with the Corporation of the Township of Emo, were named as respondents in the HRTO proceeding, c) On November 18, 2021, one year after the HRTO application was served, Township Council enacted an indemnification by-law, numbered 2021-21 that set out the circumstances under which an officer or employee may be indemnified, the maximum amount of indemnification that may be provided, and any conditions that must be met before indemnification is granted. Members of Township Council are covered by this by-law, d) The indemnification by-law requires the Township to indemnify a member of the corporation who acted in the scope of their duties if a proceeding is brought against them by a third party, including the cost of defending the member, pay any fines or costs imposed, reimburse expenses, and pay any settlement amount required, e) When a proceeding is under the MCIA, the indemnity is limited to reasonable costs and expenses, and the member is only entitled to indemnity if found not to have contravened the statute. The member must retain legal counsel approved by the Chief Administrative Officer, and no payment or liability will be assumed until the member is found not to have contravened the statute, f) Section 17 of the indemnification by-law states the by-law is not retroactive to proceedings commenced prior to it coming into force on November 18, 2021:
- BY-LAW NOT TO HAVE RETROACTIVE EFFECT 17.1 This By-Law only applies to claims for indemnity respecting Proceedings which are commenced after the effective date of this By-Law. It does not apply to Proceedings that were commenced, continued or concluded prior to its coming into force.
g) During a council meeting on June 29, 2022, Council met in a closed session where Council received legal advice regarding the HRTO proceeding. The closed session agenda item 12.2 included “Advice subject to solicitor-client privilege including communications necessary for that purpose;” - Alan McKitrick – Indemnity By-Law/HRTO35”, h) While the advice provided by legal counsel, Alan McKitrick, was subject to solicitor-client privilege, the agenda item described the purpose of the meeting to advise Council regarding the HRTO proceeding and to provide advice regarding the indemnity by-law, and i) The minutes of the June 29, 2022 meeting show that after the closed session Council returned to open session, where it debated the following resolution, which was seconded by the respondent and carried with three votes in favour and two votes against:
- TOLES—BOVEN BE IT RESOLVED that the Corporation of the Township of Emo hereby Indemnify the one (1) Mayor and two (2) Councillors name[d] in the HRTO 2020-41858-I Borderland Pride v Township of Emo et al; File Number 2003696 using By-Law 2021-21, also known as Indemnification By-Law.
WHEREAS all terms and conditions are to be follows as pertained in By-Law 2021- 21.
WHEREAS the one (1) Mayor and two (2) Councillors names in the HRTO 2020-41858-I Borderland Pride v Township of Emo et al; file 2003696 are: Mayor Harold McQuaker Councillor Harrold Boven Councillor Warren Toles
[15] The respondent’s evidence regarding this council meeting and the closed session is as follows: a) The respondent understood that there were two separate issues being dealt with in agenda item12.2: (1) the advice from their lawyer about the indemnification by-law; and (2) advice from their lawyer about the HRTO application. b) Near the start of the Council meeting when the chair called for declarations of interest, the respondent stated “not at the moment, but possibly later… there is a lack of clarity on some things.” c) At some point during the meeting, the respondent filed a written Declaration of Interest with the interim CAO/Clerk Treasurer, Ms. Crystal Gray, in which he declared a potential pecuniary interest in Item 12.2 on the Council agenda, Titled: Indemnity bylaw/HRTO. The respondent completed the Declaration of Interest in which he stated that he had a potential pecuniary interest in the “HRTO File 2020-41858 as it related to Municipal Settlement”. d) During the closed session meeting, the respondent participated in the discussion regarding the indemnification by-law but did not participate in the HRTO application portion of item 12.2. He declared a conflict and left the Council chambers and the municipal building while that matter was discussed as required by s. 5(2) of the MCIA. e) After Council finished dealing with the HRTO matter in the closed session, the respondent was summoned to re-join the meeting and participated in the remaining matters being considered by Council. Council then moved back into open session at which time the resolution to apply the indemnity by-law to reimburse himself and the others named in the HRTO matter was debated and passed, with Councillor Toles moving and the respondent seconding the resolution.
[16] The applicant alleges that the respondent breached the MCIA by participating in and voting on that resolution because the respondent had a pecuniary interest in the outcome that he had identified at the outset of the Council meeting and confirmed with a written Declaration of Interest. The applicant argued that the circumstances of this violation are so serious that they require an extreme sanction against the respondent by removing him from his office as a municipal councillor on Township Council and declaring his seat vacant.
[17] Other types of sanctions that might be imposed if a contravention of the MCIA is found are set out in section 9 of the MCIA and include a reprimand, a suspension from office for up to 90 days, declaring the seat vacant, disqualifying the member from seeking re-election for up to seven years and/or ordering restitution.
[18] When considering the appropriate penalty, section 9(2) permits the court to consider the factors that resulted in the contravention such as whether the member took reasonable steps to prevent the contravention, sought the input of the Integrity Commissioner under the Municipal Act, 2001, S.O. 2001, c. 25 or whether the contravention was committed through inadvertence or by reason of an error in judgment made in good faith.
[19] The respondent submitted that he declared a potential conflict of interest in only the discussion regarding the HRTO proceeding. He argued that his Declaration of Interest was limited to the discussion of that issue and not the issue of whether he could participate in the resolution to enact the indemnification by-law in favour of covering the legal fees and related expenses in the HRTO proceeding for himself and for the mayor and Councillor Toles.
[20] He also argued that the indemnification by-law was in fact mandatory. In other words, a resolution at Council to cover the legal expenses for his and the others named in the HRTO application was a formality that did not require a Council resolution and therefore did not contravene his obligations under the MCIA.
[21] Counsel for the respondent in legal argument, submitted that the relevant sections of the MCIA regarding the disclosure of a “pecuniary interest” were not intended to apply to circumstances where a member of a municipal council is provided financial coverage for legal fees and expenses related to decisions made by that council in the ordinary course of their business. He argued that these types of decisions would be exceptions under the mandatory declaration of pecuniary interest obligation.
Indemnification of Municipal Councillors for Legal Costs and Expenses
[22] Municipalities in Ontario have broad powers to govern their affairs as set out in the Municipal Act, 2001 (the Act). Those powers include passing by-laws for any purpose that a municipality considers necessary or desirable for the public welfare. (Section 8 of the Act.)
[23] Many municipalities pass by-laws for the indemnification of its officers and employees to protect them from financial loss or liability that may arise from their official duties.
[24] In addition to indemnification by-laws that are passed by individual municipalities, section 279 of the Act sets out the circumstances in which a municipality may indemnify its councillors for legal costs and expenses incurred in the course of their duties. A Council resolution is not required for s. 279 to apply.
[25] One of the purposes of s. 279 of the Act and of the indemnification by-laws enacted by municipalities, is to recognize that councillors may be exposed to legal risks and expenses in the course of their duties.
[26] Where a municipality does not have an indemnification by-law in place, s. 279 provides guidance to municipalities on when indemnification may be in the public interest. This assists, among other things, in ensuring that municipalities can attract and retain qualified and committed individuals to serve on Council and make difficult or controversial decisions without fear of personal liability for expenses incurred when forced to defend the decisions of Council.
The Municipal Conflict of Interest Act
General Principles and the 4(i) Exception
[27] The purpose of the MCIA is to assist in the identification of and to prevent conflicts of interest by those making decisions on behalf of municipalities. Under the MCIA, a councillor must not vote or participate in any discussion on a matter in which they have a pecuniary interest, which includes an interest in a contract, a lease, or a sale of land.
[28] Unfortunately, the term “pecuniary interest” is not defined in the MCIA. However, in Ferri v Ontario (Attorney General), 2015 ONCA 693 at para 10, Hourigan J.A., held that a “pecuniary interest” under the MCIA is restricted to a financial, monetary, or economic interest. He clarified that not all conflicts of interests are captured by the provisions of the MCIA at para 10 of his reasons:
[10] This court has held that, given the purpose of the MCIA, “what constitutes a pecuniary interest sufficient to trigger the provisions of the MCIA is not to be narrowly confined”: Orangeville (Town) v. Dufferin (County), 2010 ONCA 83, at para. 22. The competing policy imperative is that “pecuniary interest” must not be construed so broadly that it captures almost any financial or economic interest such that it risks needlessly disqualifying municipal Councillors, and others captured under the ambit of the MCIA, from participating in local matters of importance to their constituents. Section 4 (k) of the MCIA operates to respond to this concern and ameliorate the potentially harsh effects of a broad definition of pecuniary interest by ensuring that pecuniary interests that are truly remote or insignificant are not caught under s. 5.
[29] The MCIA also provides for exceptions to the provisions in s. 5 of the MCIA. One such exception is set out in section 4(i) that provides:
- Sections 5, 5.2 and 5.3 do not apply to a pecuniary interest in any matter that a member may have, (i) in respect of an allowance for attendance at meetings, or any other allowance, honorarium, remuneration, salary or benefit to which the member may be entitled by reason of being a member or as a member of a volunteer fire brigade, as the case may be; …
[30] There is limited jurisprudence on the interpretation of the s. 4(i) exception, however, the decisions that have addressed this exception appear to interpret it to prevent councillors from using their position on Council for their personal gain; not from carrying out their duties or to prevent them from being indemnified for legal costs that are incurred during the course of carrying out their duties on Council. (Moll v Fisher et al and Furniss v Nishikawa, 2018 ONSC 3674).
[31] The court in Furniss found (at para 21) that indemnification under the by-law is a “benefit” pursuant to s. 4(i) of the MCIA: “The public nature of a counsellor’s work means that the threat of lawsuits is very real. Protection from the costs of litigation is an important benefit for anyone fulfilling that role”. The court found that the respondent was also entitled to make her case to Council: doing so was a fundamental principle of the Canadian justice system where a decision would affect a person's rights, liberty, or property.
[32] The court held that the respondent’s participation in meetings dealing with her right to compensation did not violate s. 5(1) of the MCIA. Her participation and vote were in the context of a discussion involving a benefit to which she was or may have been entitled within the meaning of s. 4(i) of the MCIA.
[33] In Furniss at paragraph 23, the Court compared the application of the section 4(i) exception to a Council members’ discussion of remuneration and benefits, stating: “Municipal Councils have statutory authority to pass by-laws granting compensation and benefits to Council members. This task would be impossible if members of Council could not discuss the issues or vote to pass the appropriate by-laws.”
[34] The jurisprudence that describes when a contravention is found to have occurred under s. 5 tend to include those instances where a councillor, their business or a family member has personally benefited from a decision of Council, and where they failed to declare a pecuniary interest or they participated in Council debates and resolutions in spite of having a pecuniary interest. (The Corporation of the Townships of Brudenell, Lyndoch and Raglan (Integrity Commissioner) v. Andrea Emma Budarick, 2021 ONSC 7635, aff’d 2022 ONSC 640 (Div. Ct.); Espanola (Integrity Commissioner) v. Val Alstine, 2022 ONSC 2881; Mondoux v. Tuchenhagen, 2010 ONSC 6536, aff’d 2011 ONSC 5398 (Div. Ct.) and Adamiak v. Callaghan, 2014 ONSC 6656.)
Summary and Conclusion
[35] While the record and the submissions addressed multiple issues regarding municipal governance, I find that there are two discrete issues to be determined: a) Did the respondent contravene s. 5 of the MCIA when he verbally indicated he might have a potential pecuniary interest in an item on the Council agenda, filed a Declaration of Interest, and then participated in and voted on the resolution to utilize Township Council’s indemnification by-law to cover legal fees and related expenses incurred by him, the mayor, and another councillor? b) Was the indemnification by-law mandatory and as such, the resolution adopted by Council ultra vires?
[36] The respondent was named personally in an HRTO complaint together with mayor, another councillor, and the Township corporation. The Township council consists only of the mayor and four elected councillors. Because three of the five members of Council were to be indemnified, it would not be possible for Council to conduct its business if “pecuniary interest” is “construed so broadly that it captures almost any financial or economic interest such that it risks needlessly disqualifying municipal Councillors, and others captured under the ambit of the MCIA, from participating in local matters of importance to their constituents.” (Ferri at para 10.).
[37] I find that the respondent, by indicating a possible pecuniary interest both orally at the outset of the Council meeting and then by completing a written Declaration of Interest in which he identified the HRTO proceeding, was ensuring he was transparent regarding the issues before Council.
[38] I do not find that because he made these declarations, he therefore should be found to have contravened the MCIA, when he participated in the discussion and vote on the issue regarding enacting the indemnity by-law to cover legal expenses, as alleged by the applicant.
[39] The applicant has alleged that the respondent’s declaration applied to all parts of agenda item 12.2 and therefore included the discussion regarding the indemnification by-law, not just the HRTO application. That argument also fails. Council clearly included more than one item for discussion in this enumerated agenda item. The respondent did not participate or vote on issues regarding the HRTO application and in fact absented himself from the closed meeting room when that portion of the agenda was discussed.
[40] I also disagree with the applicant that members of a municipal council are prohibited from participating in discussion and voting on resolutions that serve to indemnify them from legal actions taken by third parties for business conducted on behalf of a municipal council, even when those decisions are controversial or unfavourable. One can imagine a scenario where every member of a municipal council is personally named in a third party proceeding. It is unfathomable that they would be unable to participate in a discussion and vote on a resolution that would indemnify them from personal legal expenses as a result, regardless of whether they recognized that there was a potential pecuniary interest that flowed to them by virtue of such a resolution.
[41] The Fresh as Amended Application serves to support this approach because the original application was discontinued against both the mayor and Councillor Toles, both of whom participated in the discussion and vote, and presumably would have also benefited from being personally indemnified for legal expenses in the HRTO application.
[42] The respondent’s second argument that the indemnification by-law was mandatory, also serves to support these conclusions.
[43] Because the Township was obligated to indemnify the respondent and the other councillors for legal expenses they incur in the course of their duties while serving on Council, the respondent’s participation was confirmatory of a by-law that required indemnification. It would have been ultra vires for the Township not to approve the indemnity resolution.
[44] In making these findings, I have not addressed the issue of whether the indemnity by-law was retroactive. While that issue was raised in the argument, it was not an issue that I was asked to determine.
[45] Even if I am incorrect in finding that the respondent did not contravene s. 5 of the MCIA, I find that such a contravention was not of the severity claimed by the applicant that would warrant the respondent being removed from office and declaring his seat vacant. A penalty of that nature, in the face of no penalty being imposed or sought against the mayor and Councillor Toles, both of whom participated in the same meeting and neither of whom declared a potential pecuniary interest, would be an unwelcome precedent.
[46] I consider the conduct of the respondent to have been made in good faith and as such would not warrant any penalty in these circumstances.
Costs
[47] The application is therefore dismissed with costs. If the parties are unable to agree on costs, they shall make written submissions to my attention within 30 days. Submissions are limited to four pages together with their Bills of Costs.
“Original signed by” The Hon. Justice B.R. Warkentin
Released: December 7, 2023